The markets had their ugliest day in a month yesterday, dropping just under one percent. By no means was this a big fall of course, just large in comparison to what has been seen recently. The SPDR S&P 500 ETF (NYSE:SPY) fell from a high of $114.85 to close the day at $113.75. The U.S Dollar was higher yesterday as well, one of the key reasons the markets were lower. Today, that is ancient history. The Federal Reserve and Plunge Protection Team saw the markets near a panic break down level and came in to save the day once more. This morning, the U.S. Dollar was pounded, markets jumping higher. The Dollar has continued to fall, negating all of yesterdays market drop and then some. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is down sharply, trading at $22.55, -0.20 (-0.88%). The SPY is dramatically higher, trading at $115.82, +2.07 (+1.82%).
Every time the markets appear to sell off and near a major break down level, the markets are saved. This is starting to become a joke in the pro trader community. While it is nice to know the markets cannot fall too much before they are saved and pushed higher, it is scary to realize that the Federal Reserve and the ‘powers’ that be can only control the Dollar for so long. Eventually they will lose control. In the short run it is a nice thing, to pump the markets up with liquidity and continue the rally. However, in the long run, it is going to cause far more problems. The Federal Reserve believes they will be on the cutting edge of tightening when needed to keep hyperinflation at bay. When have they ever been on the cutting edge of anything? They are playing with fire and unfortunately, in the next 5 years, the U.S. average citizen will be the one that gets severely burned. Be wary of those that would flood the markets with money in the short term to relieve pain, not looking at the long term long term consequences. Essentially, this is just another bubble in the mix that will be even bigger than the housing collapse and financial crisis.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
